Fdi & Ireland

ALDO DI COSMO

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During the nineties Ireland had a period of great economic growth, gaining the nickname of “Celtic Tiger”. There are different factors from which the growth came. Experiencing a period of high tariff barriers and strict prohibitions on foreign ownership of business in Ireland, they came up with the idea that those were not right choices, so the government shifted to policies that could attract foreign investments, such as lowering of tariffs and joining to the GATT. After the IDA (Industrial Development Authority) was created in order to attract foreign businesses. Its strategies included the shift from an agricultural and farming economy to a pharmaceutical, software and chemical industries based economy. A great number of foreign firms started to invest in Ireland; firms such Pfizer, Intel, eBay, Google came, through the years, to Ireland.  Ireland’s economic success is highly linked to FDI. Foreign investments came to the Ireland in search of resources and efficiency: Ireland had a well-educated workforce and, furthermore, they had low corporate taxes and ready access to the markets.  But Ireland’s success was not only because of FDI, because the government fostered the economic growth with prudent policies, furthermore the economic boom of the 90s of US lifted up also Ireland’s economy. FDI represents a good economy developer, it allows the expansion of technology, the development of industries and it gives the opportunity to create new work places. FDI is a relevant component of GDP and a good indicator of the financial situation. It also allows the country to create a strong imagine with the other future foreign businesses, leading to the situation that many firms are attracted to invest in the territory. Furthermore foreign investments represent a good complement for local productions that help to increase nation’s wealth. With this in mind subsidies in order to attract FDI represents a proper opportunity to contribute to the economic growth of a country.  But, there are several reasons to not subsidize FDI, because if there are no externalities that can affect foreign investments there is no need of subsidies. In the case of Ireland FDI represented a crucial factor for economic development, but as a result there was a domination of the local economy by foreign firms and any action aimed to undermine them could affect the country’s economy. This, together with the technological dependence and a change in lifestyle represent big disadvantages of FDI. So FDI had been successful to transform the nation, but it also brings problems of its own.